Mixed Signals in Technology Labor Market

Signs indicate the labor market for techies in the U.S. is tightening. But as recent news of layoffs at AOL suggests, the situation is far from a repeat of the late 1990s.

In July, employment of information technology workers in the U.S. increased by 4,900 people from the previous month to nearly 3.7 million, according to a report from the National Association of Computer Consultant Businesses, a trade group of IT services firms. The group, which analyzes data from the U.S. Department of Labor, said IT employment rose nearly 160,000 during the past 12 months.

Meanwhile, the unemployment rate has dropped for those in computer and mathematical occupations, a category that includes computer programmers, database administrators and computer systems analysts. The jobless rate for such workers fell from 4.2 percent in 2004 to 2.9 percent in 2005, according to the Labor Department. It was down to 2.5 percent in the second quarter of this year.

On the other hand, the median weekly earnings of people in computer and math occupations rose an anemic 1.6 percent from 2004 to 2005, according to Labor Department statistics. The country’s rate of inflation was 3.4 percent during that period.

One reason for the discrepancy between lower unemployment and slow wage growth is that many people dropped out of the computer profession completely, says Kim Berry, president of labor advocacy group the Programmers Guild.

"We don’t see any shortage," Berry says. "Ninety-seven to ’99 were hot times. This doesn’t feel like hot times."

Layoff announcements at marquee tech firms bolster Berry’s claim. Semiconductor giant Intel has moved to cut 1,000 management positions, computer maker Sun Microsystems is slashing 4,000 to 5,000 jobs, and IT services provider Computer Sciences is axing about 1,800 jobs in North America. In mid-August, software company CA said it would cut 1,700 jobs, about half of which are likely to be positions in North America.

AOL expects to pare back its worldwide workforce by about 5,000 employees—or 26 percent—during the next six months. The job cuts come as the Internet portal, a division of Time Warner, plans to offer products such as e-mail for free to broadband users. AOL declined to give details about coming layoffs. But a source within the company suggested tech support positions could be affected, given that AOL will be reducing its level of customer support with the free offerings. "Included in ‘free’ is not 24-by-7 customer support," the source says. AOL has customer support centers in cities including Tucson, Arizona, Oklahoma City and Ogden, Utah.

Despite the job cuts and meager wage growth overall, some observers view the pool of technical talent in the U.S. as quite shallow. High-tech industry group AeA (formerly the American Electronics Association) cites a dearth of quality job seekers as grounds for tapping foreign nationals. AeA calls for measures such as expanding the annual cap for H-1B guest worker visas, a move opposed by the Programmers Guild.

"High-tech companies are increasingly seeking skilled labor to feed a growing industry and cannot find it," AeA said in a report this year. "Visit the Web site of many American technology companies and you will find thousands of unfilled U.S.-based positions."